Published by the United Nations Inter-Agency Task Force on Financing for Development, highlights the critical financing challenges threatening progress toward the Sustainable Development Goals (SDGs) and climate action. It underscores the urgent need for transformative global financial reforms and large-scale investments to close widening financing gaps.

Key Findings

1. Widening Financing Gap: Developing countries face an annual financing shortfall of $4 trillion for sustainable development, a 50% increase from pre-pandemic estimates. This gap jeopardizes progress on the SDGs and climate goals.
2. Debt Crisis: Developing nations pay, on average, twice as much in interest on sovereign debt as developed countries, further limiting their ability to invest in sustainable development. Many are in debt distress or lack access to affordable financing.
3. Global Economic Challenges: Declining global growth, weak policy frameworks, and misaligned public budgets hinder progress. Private investors also need more incentives to fund SDG-related projects.
4. Outdated Financial Architecture: Established at the 1944 Bretton Woods Conference, the international financial system needs to be deemed fit to address modern challenges like climate change and inequality.

Strategic Actions

• Close Financing Gaps: Mobilize public and private investments at scale and urgently for SDG and climate projects.
• Reform Financial Architecture: Modernize international institutions and policy frameworks to support sustainable development better.
• Build Credibility and Trust: Address credibility gaps by fostering trust in multilateralism and improving transparency in financing systems.
• Develop New Pathways: Formulate innovative development strategies that align with current global challenges.

Opportunities for Action

Identifies vital moments for transformative action, including the UN Summit of the Future in September 2024 and the Fourth International Conference on Financing for Development (FfD4) in June 2025. These events are pivotal opportunities to reform global financial systems and mobilize the resources needed to achieve the SDGs by 2030.

Overview

II. The global economic context and its implications for sustainable development

Economic Dynamics and Challenges

The global economy lacks dynamism, creating challenges for development financing. Following strong growth in the early 2000s marked by globalization and technological progress, momentum has decreased. Multiple crises – the 2007/08 financial crisis, COVID-19, and geopolitical tensions – have disrupted investment, trade, and productivity growth.

Impact on Developing Countries

Developing countries face disproportionate impacts from economic shocks, with many still struggling to recover from the pandemic. Combined with climate challenges and high debt levels, these nations – especially the poorest – have limited resources to address mounting crises threatening their stability and development progress.

Growth Projections

The economic outlook for the global economy remains fragile, with growth projected at 2.4% in 2024 and a slight improvement to 2.7% in 2025. This subdued growth indicates a broader trend of weak investment and high debt levels, expected to persist in the medium term. The report outlines several downside risks that could further exacerbate this situation, including:

• Commodity Price Spikes: Fluctuations in commodity prices can lead to economic instability, particularly for countries reliant on commodity exports.
• Supply Disruptions: Ongoing conflicts and geopolitical tensions can disrupt supply chains, affecting trade and economic performance.
• Persistent Inflation: High inflation rates can erode purchasing power and increase the cost of living, further straining economies.
• Trade Fragmentation: The rise of protectionist policies and trade barriers can hinder global trade flows, impacting economic growth.

Potential Upside Risks

Despite these challenges, it identifies potential upside risks that could positively influence the economic landscape. These include:

• Faster Disinflation: A quicker-than-expected reduction in inflation could ease financing conditions, making it easier for countries to borrow and invest.
• Less Contractionary Fiscal Stance: If countries adopt fiscal policies that are less restrictive than anticipated, it could stimulate economic activity and growth.
• Stronger Economic Performance in Major Economies: Improved performance in significant economies could have a positive spillover effect on global growth, benefiting developing countries as well.

III.A Domestic public resources

Focuses on the critical role of domestic public finance in achieving sustainable development goals (SDGs). It emphasizes the increasing importance of mobilizing domestic resources, mainly tax revenue, as a central aspect of financing for development discussions among Member States.

Key Messages and Recommendations

1. Importance of Domestic Public Finance: Domestic public finance drives SDG progress through effective tax and spending policies that promote equity, maintain stability, reduce poverty, and support growth.
2. Historical Context: The Monterrey Consensus and Doha Declaration combined domestic public and private resources for development financing, though they gave limited attention to international tax cooperation.
3. Addis Ababa Action Agenda: The Addis Ababa Action Agenda prioritizes domestic public finance as its first action area, advocating for increased resources, better spending, and sustainable financial systems.
4. Whole-of-Government Approach: Promotes integrated public finance management, optimizing revenue collection and spending. This approach strengthens public trust and social cohesion while delivering effective public services that reduce poverty and drive growth.
5. International Tax Cooperation and Illicit Financial Flows: Member States increasingly recognize the vital role of international tax cooperation and anti-IFF measures. These efforts are essential to help countries secure and retain development resources through better domestic resource mobilization.

III.B Domestic and international private business and finance

Examines the critical role of private sector activity in driving sustainable economic growth and development. It highlights the importance of aligning private business and finance with sustainable development goals (SDGs) to ensure that economic growth is inclusive, resilient, and environmentally sustainable.

Key Messages and Recommendations

1. Role of Private Sector: Underscores that private business activity, investment, and innovation drive productivity, inclusive economic growth, and job creation. The private sector is essential for mobilizing resources and fostering economic dynamism, particularly in developing countries.
2. Post-Crisis Slowdown: Following the 2008 financial crisis, private sector dynamism has seen a noticeable slowdown. This decline is linked to broader macroeconomic challenges, contributing to a widening investment gap in achieving the SDGs. The report emphasizes the need to revitalize private sector development to align with sustainable development objectives.
3. Investment Trends: FDI flows have slowed recently due to a global shift from capital-intensive projects to digital and service-based economies, creating concerning regional and sectoral investment imbalances.
4. Financing for Development: Underlines mobilizing private finance through innovative mechanisms like blended finance to bridge investment gaps. It recommends policies incentivizing private sector investment in sustainable projects, focusing on renewable energy, infrastructure, and social enterprises.
5. Alignment with SDGs: Emphasizes aligning business practices with SDGs through sustainable operations and responsible investing. It recommends that governments create incentives to encourage private sector participation in sustainable development.

III.C International Development Cooperation

Focuses on the essential role of international collaboration in financing sustainable development and achieving the Sustainable Development Goals (SDGs). It emphasizes the need for effective partnerships among various stakeholders, including governments, international organizations, and the private sector, to mobilize resources and support development efforts, particularly in developing countries.

Key Messages and Recommendations

1. Reaffirming Commitments: Stresses the importance of reiterating existing commitments to official development assistance (ODA) and enhancing the effectiveness of international development cooperation. It calls for a renewed focus on supporting developing countries in their efforts to mobilize domestic resources and achieve the SDGs.
2. Scaling Up Financing: Highlights the need to scale up financing for global public goods, critical for addressing challenges such as climate change, health crises, and poverty. It advocates for innovative financing instruments and mechanisms to mobilize additional resources beyond traditional ODA.
3. Revitalizing Development Effectiveness: The changing landscape of development cooperation necessitates revitalizing the development effectiveness agenda. This includes ensuring that all providers of development assistance support country-owned plans and financing strategies, thereby enhancing local ownership and accountability.
4. Addressing Debt Challenges: Discusses the urgent need to address the debt challenges many developing countries face, which hinder their ability to invest in sustainable development. It calls for a fair and practical debt resolution architecture to provide countries with the necessary fiscal space to pursue their development goals.
5. Promoting South-South Cooperation: Emphasizes the importance of South-South cooperation in sharing knowledge, resources, and best practices among developing countries. This approach can enhance resilience and foster innovative solutions tailored to local contexts.
6. Engaging All Stakeholders: Advocates for inclusive engagement of all stakeholders, including civil society, the private sector, and local communities, in the development cooperation process. This engagement is crucial for ensuring that development efforts are responsive to the needs and priorities of the populations they aim to serve.

III.D International trade as an engine for development

Explores the significant role of international trade in driving economic growth and development, particularly in developing countries. It emphasizes the need for a conducive trade environment that supports sustainable development and addresses the challenges and opportunities presented by the global trading system.

Key Messages and Recommendations

1. Trade as a Growth Driver: Underscores that international trade is a crucial engine for economic growth, job creation, and poverty reduction. It highlights how trade can enhance productivity, foster innovation, and facilitate access to global markets for developing countries.
2. Long-Term Trade Trends: Reviews long-term trends in trade since the Monterrey Consensus, noting that while trade has generally expanded, developing countries have faced challenges in fully integrating into the global trading system. It points out the need for policies that enable these countries to diversify their exports and enhance their competitiveness.
3. Multilateral Trading System: Discusses the importance of a robust multilateral trading system in promoting fair and equitable trade practices. It calls for reforms to address the imbalances and inequities that exist within the current system, ensuring that developing countries can benefit from trade opportunities.
4. Sustainable Development and Trade: Emphasizes aligning trade policies with sustainable development goals. It advocates for trade practices that promote environmental sustainability, social inclusion, and economic resilience, ensuring that trade contributes positively to development outcomes.
5. Addressing Trade Barriers: Highlights the various barriers to trade that developing countries face, including tariffs, non-tariff barriers, and logistical challenges. It calls for concerted efforts to reduce these barriers and enhance trade facilitation measures to improve access to global markets.
6. Technology and Trade: Notes the impact of technology on trade, particularly in terms of digital trade and e-commerce. It encourages the adoption of technology to enhance trade efficiency and expand market access for small and medium-sized enterprises (SMEs) in developing countries.
7. Inclusive Trade Policies: Advocates for inclusive trade policies that consider the needs of marginalized groups, including women and youth. It emphasizes the importance of ensuring that trade benefits are equitably distributed and that vulnerable populations are supported in trade activities.

III.E Debt and debt sustainability

Addresses the critical issues surrounding debt levels in developing countries and the implications for sustainable development. It highlights the challenges posed by rising debt burdens and the need for effective debt management strategies to ensure that countries can finance their development goals without compromising their economic stability.

Key Messages and Recommendations

1. Rising Debt Levels: Outlines the alarming increase in debt levels among developing countries, exacerbated by factors such as the COVID-19 pandemic, global economic slowdowns, and high interest rates. It emphasizes that unsustainable debt levels can hinder economic growth and limit fiscal space for essential health, education, and infrastructure investments.
2. Debt Sustainability Framework: Discusses the importance of establishing a robust debt sustainability framework that allows countries to assess their debt levels and manage their borrowing effectively. This framework should consider current and future economic conditions to ensure that debt remains manageable.
3. Debt Restructuring and Relief: Advocates for timely and effective debt restructuring mechanisms to relieve countries facing unsustainable debt burdens. It calls for international cooperation to facilitate debt relief efforts and ensure that countries can regain fiscal space to invest in sustainable development.
4. High Interest Rates and Fiscal Constraints: Highlights the impact of high interest rates on debt sustainability, particularly in tightening global monetary policies. It warns that prolonged periods of high borrowing costs can exacerbate debt service burdens and constrain fiscal resources needed for development.
5. Linking Debt to Development Goals: Emphasizes aligning debt management strategies with sustainable development goals. It calls for integrating development considerations into debt policies to ensure that borrowing supports investments contributing to long-term economic growth and social well-being.
6. Role of International Financial Institutions: Discusses the role of international financial institutions in supporting debt sustainability efforts. It encourages these institutions to provide technical assistance, policy advice, and financial support to help countries manage their debt effectively.
7. Promoting Transparency and Accountability: Stresses the importance of transparency and accountability in debt management. It advocates for improved reporting and monitoring of debt levels and borrowing practices to enhance trust and ensure that resources are used effectively.

III.F Addressing systemic issues

Focuses on the broader systemic challenges hindering progress towards sustainable development and achieving the Sustainable Development Goals (SDGs). It emphasizes the interconnectedness of various global issues and the need for comprehensive solutions that address these systemic challenges.

Key Messages and Recommendations

1. Interconnected Global Challenges: Highlights that systemic issues such as climate change, inequality, and economic instability are interlinked and require coordinated responses. It stresses that addressing one isolated issue is insufficient; a holistic approach is necessary to create sustainable solutions.
2. Global Economic Environment: Discusses the current global economic environment characterized by slow growth, high inflation, and rising interest rates. It notes that these conditions exacerbate existing vulnerabilities, particularly in developing countries, and hinder their ability to mobilize resources for sustainable development.
3. Inequality and Exclusion: Emphasizes the growing inequalities within and between countries, which pose significant barriers to achieving the SDGs. It calls for targeted policies to address social and economic disparities, ensuring that marginalized and vulnerable populations are included in development processes.
4. Global Governance and Cooperation: Advocates for strengthened global governance and international cooperation to tackle systemic issues effectively. It highlights the need for inclusive decision-making processes that involve all stakeholders, including governments, civil society, and the private sector.
5. Financing for Development: Underscores the importance of innovative financing mechanisms to address systemic challenges. It calls for mobilizing diverse sources of finance, including public, private, and philanthropic investments, to support sustainable development initiatives.
6. Resilience Building: Stresses the need to build resilience against systemic shocks, such as pandemics, economic crises, and climate-related disasters. It advocates for investments in social protection systems, infrastructure, and sustainable practices that enhance the capacity of communities to withstand and recover from such shocks.
7. Policy Coherence: Highlights the importance of policy coherence across different sectors and levels of governance. It calls for aligning national and international policies with the SDGs to ensure that efforts in one area do not undermine progress in another.

III.G Science, technology, innovation and capacity building

Focuses on the critical role that science, technology, and innovation (STI) play in achieving sustainable development and the Sustainable Development Goals (SDGs). It emphasizes the need for enhanced capacity building to leverage these tools effectively for development.

Key Messages and Recommendations

1. Importance of STI for Sustainable Development: Highlights that science, technology, and innovation drive economic growth, social progress, and environmental sustainability. They can help address complex challenges such as climate change, health crises, and food security.
2. Innovation Ecosystems: Discusses the need to foster innovation ecosystems that support research and development (R&D) and the commercialization of new technologies. This includes creating an enabling environment for startups, promoting public-private partnerships, and investing in education and skills development.
3. Access to Technology: Emphasizes the importance of equitable access to technology, particularly for developing countries. It calls for international cooperation to facilitate technology transfer and ensure that all countries can benefit from advancements in science and technology.
4. Capacity Building: Stresses the need for capacity building at all levels, including governments, institutions, and communities. This involves enhancing skills, knowledge, and infrastructure to utilize STI for effective sustainable development. Training programs and educational initiatives are crucial for empowering individuals and organizations.
5. Data and Digitalization: Highlights the role of data and digital technologies in driving innovation and improving decision-making. It calls for investments in data collection, analysis, and sharing to inform policies and practices that support sustainable development.
6. Addressing Inequalities: Points out that disparities in access to technology and innovation can exacerbate existing inequalities. It advocates for targeted efforts to ensure that marginalized and vulnerable populations are included in STI initiatives, promoting inclusive development.
7. Global Collaboration: Underscores the importance of global collaboration in advancing science and technology for sustainable development. It encourages partnerships among governments, academia, the private sector, and civil society to share knowledge, resources, and best practices.

IV. Data, monitoring and follow-up

Focuses on the critical role of data and monitoring in tracking progress towards the Sustainable Development Goals (SDGs) and ensuring accountability in sustainable development efforts. It emphasizes the need for robust data systems and effective monitoring frameworks to inform decision-making and policy implementation.

Key Messages and Recommendations

1. Importance of Data for Decision-Making: Highlights that high-quality, disaggregated data is essential for understanding development challenges, measuring progress, and making informed policy decisions. It underscores the need for data to be timely, relevant, and accessible to all stakeholders.
2. Strengthening National Statistical Systems: Calls for strengthening national statistical systems to improve data collection, analysis, and dissemination. This includes investing in infrastructure, technology, and human resources to enhance the capacity of national statistical offices.
3. Data Disaggregation: Emphasizes the importance of disaggregating data by various factors such as gender, age, income, and geographic location. This disaggregation is crucial for identifying inequalities and ensuring no one is left behind in development efforts.
4. Use of Technology and Innovation: Discusses the potential of technology and innovative approaches to enhance data collection and monitoring. This includes using big data, remote sensing, and digital platforms to gather and analyze information efficiently.
5. Monitoring Frameworks: Outlines the need for effective monitoring frameworks that align with the SDGs. It calls for establishing clear indicators and targets to track progress and assess the impact of policies and programs.
6. Stakeholder Engagement: Stresses the importance of engaging various stakeholders, including governments, civil society, and the private sector, in data collection and monitoring processes. Collaborative efforts can enhance the relevance and accuracy of data.
7. Global Data Initiatives: Highlights the role of global initiatives and partnerships in promoting data sharing and collaboration. It encourages countries to participate in international data initiatives to enhance their capacity and improve data quality.

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